discussion 5

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CHAPTER 5 Decision Making, Learning, and Creativity

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Learning Objectives

1. Understand the nature of managerial decision making, differentiate between programmed and nonprogrammed decisions, and explain why nonprogrammed decision making is a complex, uncertain process.

2. Describe the six steps that managers should take to make the best decisions.

3. Identify the advantages and disadvantages of group decision making and describe techniques that can improve it.

4. Explain the role that organizational learning and creativity play in helping managers to improve their decisions.

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The Nature of Managerial Decision Making

Decision Making:

• The process by which managers respond to opportunities and threats by analyzing options and making determinations about specific organizational goals and courses of action.

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Decision Making 1

Programmed Decision Making:

• Routine, virtually automatic decision making that follows established rules or guidelines.

• Managers have made the same decision many times before.

• There are rules or guidelines to follow based on experience with past decisions.

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Decision Making 2

Nonprogrammed Decisions:

• Nonroutine decision making that occurs in response to unusual, unpredictable opportunities and threats.

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Topics for Discussion 1

What are the main differences between programmed decision making and nonprogrammed decision making? [LO5-1]

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Decision Making 3

Intuition;

• Feelings, beliefs, and hunches that come readily to mind, require little effort and information gathering and result in on-the- spot decisions.

Reasoned Judgment:

• Decisions that take time and effort to make and result from careful information gathering, generation of alternatives, and evaluation of alternatives.

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The Classical Model

Classical Decision-Making Model:

• A prescriptive model of decision making that assumes the decision maker can identify and evaluate all possible alternatives and their consequences and rationally choose the most appropriate course of action.

Optimum Decision:

• The most appropriate decision in light of what managers believe to be the most desirable consequences for the organization.

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The Classical Model of Decision Making

Figure 5.1

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The Administrative Model 1

Administrative Model

• An approach to decision making that explains why decision making is inherently uncertain and risky and why managers usually make satisfactory rather than optimum decisions.

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Topics for Discussion 2

In what ways do the classical and administrative models of decision making help managers appreciate the complexities involved in real-world decision making? [LO5-1]

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The Administrative Model 2

Bounded Rationality:

• Cognitive limitations that constrain one’s ability to interpret, process, and act on information.

Incomplete Information:

• Happens because the full range of decision-making alternative is unknowable in most situations and the consequences are uncertain.

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Why Information Is Incomplete

Figure 5.2

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Causes of Incomplete Information 1

Risk:

• The degree of probability that the possible outcomes of a particular course of action will occur.

Uncertainty:

• The probabilities of alternative outcomes cannot be determined and future outcomes are unknown.

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Causes of Incomplete Information 2

Figure 5.3

Young Woman or Old Woman?

Ambiguous Information:

• Information that can be interpreted in multiple and often conflicting ways.

Chronicle of World History/Alamy Stock Photo

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Causes of Incomplete Information 3

Time Constraints and Information Costs:

• Managers have neither the time nor money to search for all possible alternatives and evaluate potential consequences.

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Causes of Incomplete Information 4

Satisficing:

• Satisficing is a strategy of searching for and choosing an acceptable, or satisfactory, response to problems and opportunities, rather than trying to make the best decision.

• Managers search for and choose acceptable, or satisfactory, ways to respond to problems and opportunities rather than trying to make the optimal decision.

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Topics for Discussion 3

Why do capable managers sometimes make bad decisions? What can individual managers do to improve their decision-making skills? [LO5-1, 5-2]

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Steps in the Decision-Making Process

Figure 5.4

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General Criteria for Evaluating Possible Courses of Action

Figure 5.5.

Is the possible course of action…

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Group Decision Making 1

• Superior to individual making.

• Choices less likely to fall victim to bias.

• Able to draw on combined skills of group members.

• Improve ability to generate feasible alternatives.

• Allows managers to process more information.

• Managers affected by decisions agree to cooperate.

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Group Decision Making 2

Groupthink:

• A pattern of faulty and biased decision making that occurs in groups whose members strive for agreement among themselves at the expense of accurately assessing information relevant to a decision.

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Topics for Discussion 4

In what kinds of groups is groupthink most likely to be a problem? When is it least likely to be a problem? What steps can group members take to ward off groupthink? [LO5-3]

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Group Decision Making 3

Devil’s Advocacy:

• Critical analysis of a preferred alternative, made in response to challenges raised by a group member who, playing the role of devil’s advocate, defends unpopular or opposing alternatives for the sake of argument.

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Group Decision Making 4

Diversity among Decision Makers:

• Diverse groups are often less prone to groupthink because group members already differ from each other and thus are less subject to pressures for uniformity.

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Organizational Learning and Creativity 1

Organizational Learning:

• The process through which managers seek to improve employees’ desire and ability to understand and manage the organization and its task environment.

D. Hurst/Alamy Stock Photo

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Topics for Discussion 5

What is organizational learning, and how can managers promote it? [LO5-4]

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Organizational Learning and Creativity 2

Learning Organization:

• An organization in which managers try to maximize the ability of individuals and groups to think and behave creatively and thus maximize the potential for organizational learning to take place.

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Senge’s Principles for Creating a Learning Organization

Figure 5.6

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Organizational Learning and Creativity 3

Creativity:

• A decision maker’s ability to discover original and novel ideas that lead to feasible alternative courses of action.

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Promoting Individual Creativity

Certain conditions enhance individual creativity.

• Opportunity and freedom to generate new ideas.

• Opportunity to experiment and learn from mistakes.

• No punishment for ideas that seem outlandish.

• Constructive feedback.

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Promoting Group Creativity

Brainstorming:

• Managers meet face-to-face to generate and debate many alternatives.

• Group members are not allowed to evaluate alternatives until all alternatives are listed.

• Group member are encouraged to be as innovative and radical as possible.

• When all alternatives are listed, the pros and cons of each are discussed and a short list created.

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Building Group Creativity 1

Production Blocking:

• Loss of productivity in brainstorming sessions due to the unstructured nature of brainstorming.

Nominal Group Technique

• A decision-making technique in which group members write down ideas and solutions, read their suggestions to the whole group, and discuss and then rank the alternatives.

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Building Group Creativity 2

Delphi Technique:

• A decision-making technique in which group members do not meet face-to-face but respond in writing to questions posed by the group leader.

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Intrapreneurship and Organizational Learning

Product Champion:

• A manager who takes “ownership” of a project and provides the leadership and vision that take a product from the idea stage to the final customer.

Skunkworks:

• A group that is deliberately separated from normal operations to encourage members to devote all their attention to developing new products.

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BE THE MANAGER

What are you going to do?

Because learning changes everything.®

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© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.

No reproduction or further distribution permitted without the prior written consent of McGraw Hill.